Revenue / Profit / Contribution / Break-Even Flashcards
What are costs ?
Incurred in making and delivering products / and or services
What is revenue ?
Revenue = Price x Quantity sold
Amount earned by a business by selling products and services
What is profit?
Profit =Total revenue- Total Costs
Difference between total revenue + total costs
What is Variable cost + examples
Variable cost is a cost that varies with output
•Raw materials
•Wages
What is fixed cost + examples
Fixed cost is a cost that does not change with output
•Rent
•Salaries
Define Breakeven point
Total revenue = Total cost
Define contribution
Difference between revenue and variable costs
Define CPU(contribution per unit)
Selling Price per unit - Variable cost per unit
Margin of safety (Mos)
Actual output- Breakeven output
Why Breakeven ?
Breakeven predicts the minimum amount of goods/services needed to not make a profit or loss
Lower Breakeven / lower risk
Breakeven formula
Fixed cost / (CPU)
Fixed cost / Selling price per unit - Variable price per unit
Total contribution
CPU x Number of units sold
Maximise Breakeven output
Reduce overheads
Negotiate raw materials and other outputs
Maximise added value
Break-Even analysis for start up
Advantages:
• Provides measurable targets
• Key part of business plan
•Encourages forecasts of cost
Disadvantages:
•Hard to plot/ make
•Based upon assumptions
•Estimated
Gross profit formula
Sales revenue - Cost of sales
